The phantom Texas economic bust from plunging oil prices

Richard Rider, Chairman, San Diego Tax Fighters Undesignated 5 Comments

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When the dramatic drop in oil prices occurred starting in mid 2014, liberals were conflicted.  They hated the fact that low oil and gas prices increased the attractiveness and use of fossil fuels. But they took solace in the fact that at least the irritating Texas economic boom was finally reversed — that a hick state’s economy built on their lucky abundance of natural resources would now be the Lone Star State’s undoing.  The progressives were actually gloating about the resulting economic bust the hated Texans would experience.

Only one problem for liberals. It didn’t happen.  Texas is still chugging along, with hardly a hiccup from the plunge in petroleum prices.

This ain’t our grandparents’ Texas.  No-sir-re-bob.

Today’s Texas is a highly diversified economy.  Yes, the oil industry is certainly important — but it’s only one component of the state’s economy — and a shrinking one at that.

Consider this recent history of the Texas unemployment rate — remembering the precipitous decline in petroleum prices starting in mid-2014:

Mar 31, 2015  4.20%
Feb. 28, 2015 4.30%
Jan. 31, 2015  4.40%
Dec. 31, 2014  4.60%
Nov. 30, 2014 4.60%
Oct. 31, 2014   4.70%
Sept. 30, 2014 4.80%
Aug. 31, 2014   4.90%
July 31, 2014   5.00%
June 30, 2014 5.00%
May 31, 2014   5.10%
April 30, 2014 5.20%
Mar 31, 2014   5.30%
Feb. 28, 2014  5.40%
Jan. 31, 2014  5.50%
https://ycharts.com/indicators/texas_unemployment_rate

After all, NONE of the companies that left California for the Lone Star State in the last few years went there because of the oil business.  Texas simply offers a superior economic climate.  And keep in mind that the low Texas unemployment rate is IN SPITE OF the fact that each year a great influx of economic refugees from around the nation relocate there.

BTW, the March CA unemployment rate?  6.5% — a full 55% higher than the March Texas rate of 4.2%.  And that in spite of the fact that California annually LOSES more people to other states than come here from such states.
https://ycharts.com/indicators/california_unemployment_rate

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Comments 5

  1. There is a natural lag between the drop in oil prices and the resultant loss in jobs. As pointed out in the Houston Chronicle article, Texas is just now starting to experience that loss in jobs. To be fair, however, 53 consecutive months of job growth is still quite impressive.

  2. Post
    Author

    Bill is right to post that piece. Apparently the oil drilling segment of the Texas IS taking a hit. More is expected in the next few months. This is a subset of the oil and gas business (including refining, etc.), which itself constitutes about 9% of the current Texas economy.

    But it’s a bit misleading when one looks at the NUMBER of jobs lost. This 25,400 net lost jobs in March would be a BIG deal in a rural state, but it not that big a deal in a state with 27 million people.
    http://quickfacts.census.gov/qfd/states/48000.html

    Indeed, in SPITE of that hit, the Texas unemployment rate dropped a tenth of a percent in March, while the national rate remained at 5.5%.

  3. Richard,

    I am not sure I would call the job loss “not that big a deal.”

    From the article:

    “JP Morgan’s chief economist Michael Feroli said the losses are tantamount to a recession, the Wall Street Journal reported. Referring to the March report, Feroli said “a proportional loss on the national scale would be if the U.S. lost 304,000 jobs – a recession-like outcome not seen in some time.”

  4. Post
    Author

    HQ, true, if that monthly job loss goes on for a period of time. But ONE MONTH? Still a hiccup. Besides, how many recessions have we been through where the rate of unemployment kept going DOWN (well, for one month)? It’s likely that the drilling layoffs will be dramatic, but completed in a few months (assuming no price rebound).

    Besides, consider the job GROWTH of Texas. In January 2010 the employed in Texas numbered 10,234,000. In this March the number has grown to 11,753,000 — an increase of 1,519,000.
    http://data.bls.gov/timeseries/SMS48000000000000001

    For that figure to adjust back to the 2010 number, Texas would have to lose 25,400 jobs each month for about 60 months — five years. Can’t see that happening — not even close. At least if the national economy doesn’t slide too much.

    Now, a petroleum dependent state such as North Dakota will get hammered by these cutbacks. They lost only 3,000 jobs, but their entire labor force is 421,400 — including a huge number who came for the boom times. That’s a far bigger hit than Texas losing 25,400 jobs with a more stable labor force of 11,753,000.

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